The insurance covers which this industry provides you with come in different forms and are subjected to cover risks of different sort. You can get insured against vagaries of life such as illness, accident of any kind, fire, theft, damage to property due to any reason such as natural catastrophe and much more. Basically, before you venture in to what is insurance, how it works and what are its social implications, you first need to develop an understanding as to how important insurance is.
Insurance should not only be understood as a mechanism to protect you from any damage or loss, but, you should also understand insurance as a partnership or an agreement. This particular agreement allows not only individuals but also businesses to venture out, reach and work in areas that they would have avoided otherwise due to the risks involved. The importance of insurance doesn’t end here and the list continues.
Though there are certain events such as illness and natural calamities that humans cannot control but in such scenarios, insurance helps you in the recovery process by either relieving you from the financial debacle or by at least limiting it. Apart from the protection provided, insurance also acts as an acting force behind other activities because it diversifies, absorbs and manages the risks involved. Such productive activities in which insurance acts as a precondition are like expansion of business, starting a new venture or buying a new home etc.
Role of Insurance in Economy:
Insurance has a profound effect on the worldwide economy also. This effect is present in varied form such as:
This sector employs a very large number of people.
The relevance and importance of the banking sector is something known by all, the insurance sector acts and works with the banking sector in a complementary fashion. this way of working involves:
Offering an access to credit in an easier way
Providing the market with more liquidity and transparency
Allowing the flow of savings to investments of long term
This way the economy is provided with additional support.
Social effects of Insurance:
Thus it would be quite clear to you how insurance is not just a way of providing protection but is actually an industry that has not only financial advantages and roles but also social ones. The advantages that insurance provides to either an individual or to a business, reaches to every individual in some way. You can understand this in the way that might be the local store which you really like was started just because the owner got protection from an insurance company. Therefore, neither the society is untouched from the advantages of insurance nor can its social effects undermined or denied. Some of the biggest social effects of insurance are:
The biggest hindrance that stops an individual from venturing in to business is the apprehension about profit if the business does not generate good income. Insurance covers this, thus providing a person with backing to start a new business venture.
Feeling of Security:
Insurance provides a sense of security to a businessman because with insurance the burden of loss is shared between the business owner and the insurance company. This way, the encouragement to expand and take bold measures in business is increased.
Unemployment to youth is one of the biggest problems that the society is facing today and numerous steps and measures are being taken to tackle this. The insurance industry provides employment to thousands of individuals and thus it plays a considerably major role in providing a solution to the problem known as unemployment.
Security to Property:
Being a working individual you would know well that property is a very valuable asset and also it is very difficult to get one. Thus, it can be really shattering if an individual loses his property due to factors such as a natural calamity or fire. Insurance can cover this damage, which means your loses get compensated and it becomes a lot easier for you to accept your loss.
If the earning member of a family passes away all of a sudden or goes through an industrial injury, it would not only be shattering or his family and other people who are related to him but can also pose as a social problem. Once the damage is done, the only solution to this problem is insurance. Insurance cover provides the family with compensation and financial support, thus making things bit easier for them.
Facility of Research:
For a business owner, insurance companies can be very helpful because they carry out research and provide data to businesses. This data is about the average number of accidents or death that happens in the industry so that the owner will also have a good idea of the odds
The protection that insurance provides a business helps it in entering into new ventures and expanding. This expansion not only facilitates the economic growth of the company but also the society as well as the nation.
Equips Business for Competition:
Insurance gives credit and protects small business, which instills them with the confidence and courage to enter the competition of the big league with bigger companies. This way a favorable business atmosphere is created.
Promotes International Trade:
From centuries, international trade has been a very crucial part of the economy and also the society has been greatly affected by it. Insurance protects the exporters from the risks involved in international trade and thus promotes international trade.
Today, any living individual has too many things to take care of and worry about, so as to live a good life. If in this scenario, he also has to worry about the uncertainties of life; his efficiency would be greatly hampered. Insurance saves you from this and provides you with mental peace. This mental peace is the biggest social effect of insurance as it brings order to chaos.